Wednesday, 6 October 2010

Moths And Motoring

Every now and then Garathon and I bat around ideas and problems over the interwebs. Last time round, we searched for the identity of one of these hideous creatures, which accosted us as we left the pub at the end of July (The Other Half had to tackle it, as I had been reduced to a useless quivering wreck).

(Trust me, it was a lot more scary at night and whilst it's trying to GET INTO YOUR FUCKING CAR.)

Turns out, it's a "swallow-tailed moth", though frankly "Satan's Vampire Moth of Malevolence" would suit it somewhat better. Anyway, this time round Garathon has posed a question that warrants careful consideration. The Court of Justice of the EU has announced that it is "legally inappropriate" for insurance companies to vary their premiums on the grounds of gender. Although such things are currently legal, so long as there is sufficient actuarial and statistical ground, that might be about to change. Garathon pointed this out in reference to car insurance, so that's what I've been focussing my thinking on.

Since immediate inspiration eluded me, I decided to gather together my brain trust: BigHead, Brutal Snake, edenspresence, Crematorium del Masque, and Doc Zero (and by "gather together" I mean "go to coffee and harangue them"). I then demanded their takes, I'm still horribly confused. I asked C as well, just after a glorious 3-0 badminton victory that will echo through the ages, and I'm still not sure.

Having said that, though, I've a least least managed to pull together a few thoughts. First of all, whatever people may think of the necessity to prove a first order biological difference before allowing variable services according to sex, I don't see how you could come up with a blanket rule any other way. The argument that cultural distinction is not a good enough reason seems to me pretty sound. Otherwise, to take an American example, you could argue black people should be forced to pay more for health insurance because so many of them get shot or die of overdoses. Perhaps this would allow white people's premiums to go down, and it seems reasonable to assume insurance companies would be for it if they could (once you start refusing to offer coverage to people with minor medical issues they weren't even aware of, you lose any chance whatsoever of being given the benefit of the doubt), but that seems a sure-fire way to reinforce a status quo that we should be deeply disastified with.

(As an aside, this is also why I don't find myself convinced by C's argument that insurance companies shouldn't be made to act as if the world were perfect; there is plenty of evidence to suggest that equality follows legislation, rather than the other way round.)

So the law itself seems like a reasonable idea. I should also mention that I have a problem with the idea that differentiating on the grounds of gender is reasonable simply because it works and it's easy. I think the court is right to note the massive amount of other, less measurable variables that are far more important in judging one's aptitude. The idea that it would cost insurance companies more to check them is something I am not particularly bothered by, even if it would increase my premiums, though I realise that this is easily said without knowing exactly how much it would cost. Indeed, much of this comes down to degrees, most particulary how much statistical evidence courts would require - a problematic consideration if ever I heard one.

Moreover, there are two obvious problems to stating only clearly recognisable biological factors should be considered. The first is that if we're going to limit ourselves to what can be directly linked to biology, we might not be able to justify increased premiums for the very young, instead having to use non-decreasing functions to track people as they head inexorably towards their dotage. At least, I think that's what would happen, I'm hardly an expert; perhaps there really is a demonstrable biological cause behind being 17 years old and acting like a total dickhead. I'm not sure it would hold up in court, though.

The second, which I think is more important, is that my example of American insurance, besides being shaky (opinions differ on just how shaky) on the grounds that car insurance is optional for living in a way health insurance isn't (or at least, shouldn't have to be) fails to take into account the fact that UK anti-cartel laws are, to my understanding, a great deal stronger than the US equivalents, or lack thereof. We're not talking about people being unable to gain insurance. Considering age might work as a comparison to gender, but there exist insurance companies who specifically cater for older clients, assuming they have sufficifent no claims bonus. This is the advantage of the no claims idea, it actually provides a way of determining how good a driver one is (imperfect though it obviously is, but that's probability for you; a fickle mistress at the best of times).

Indeed, it occurs to me that there is a possible solution here to both the above problems, which is to increase the initial premiums, but then increase the degree to which those premiums fall after X years of no claims. I'm not claiming this is a brilliant solution - certainly I haven't put any number on it - but it's at least an alternative which would make one's payments more dependent on actual skill, rather than simply what demographic you can most easily be placed in. An alternative would be to put together a test which gives a percentage score to one's driving, and base the premiums on that. Of course, such tests already exist, more or less, and many (including myself) choose not to undertake them because of the cost involved. I suppose at that point we're talking about insurance companies discriminating against the fiscally unwise, which pretty much sounds like their perogative. Unless of course they discriminate against fiscally unwise men more.

4 comments:

Some musings on the idea of spending resources finding out more detail about someone...

First, I'll be working on the assumption that, even with infinite resources, we can't get access to an individual's accident probability distribution (if such a thing existed, which it doesn't, but let's pretend it does for now). I'll also assume that sometimes we would get things pretty badly wrong. But let's suppose we can somehow divide the population into lots and lots and lots of categories and come up with an insurance premium for each category.

The problem here is that, since the categories are now very small, and that there would be some big differences in accident distribution between some categories. We'd surely see much wider ranges of premiums. Some people would pay much less than anyone does now, some people would have to pay much more.

Now, since we can't categorize people perfectly, some people are going to end up very screwed by this. It isn't very nice to go for a system that really really hurts someone that it shouldn't. Better to slightly hurt lots of people that it shouldn't than to really damage some. If you're a utilitarian, you could also use the non-linear utility for money to argue that a big increase to the range of premiums actually reduces total happiness. But don't be a utilitarian, because they smell.

Further, it even doesn't seem particularly nice to come down that hard on the people who actually do deserve really high premiums because of their riskiness. Differentiating based on general "high-level" categories avoids this: a little bit of "unfairness", in the sense of paying more than you should, for some people in order to allow others to actually have a chance of affording to drive. Having to pay a bit more because you're sucked into the same big category as high risk drivers is a bit annoying, but nobody really seems too upset by this, so the concept seems to be acceptable.

While I hope to post something actuarially relevant at the weekend, I will first expand upon Squid’s comments regarding the (now identified) moth. It was, of course, much bigger than the picture (those of you who remember forcing a byakhee into the boot of a Vauxhall Astra a few years back will understand). Quite frankly, I think it a tribute to the Nissan workers at Sunderland that any of us survived.

I shall give BigHead's comment some thought over the weekend. I'd just like to echo Garathon's point that the moth we were accosted by was large enough to be driving its own Nissan. Though it wasn't a byakhee you guys kidnapped it was one of the Calga NaMor, which aren't quite so dangerous.

Or at least, they weren't when they were hovering bags of gas with prehensile poisonous tongues. These days they're something completely different. Hooray for recycling!